BCG - the matrix, and RMS - relative market share

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The Experience Curve - an introduction

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Bruce Henderson did some research in the 1960s that showed that every time the production of airplanes in U.S. factories in World War II had doubled, the costs of producing a plane fell by about 20%. (The work force was mostly made up of women, as the male factory workers had been drafted into the armed forces.) This relationship between doubling production and a 15% to 30% reduction in costs has been confirmed all over the world for all kinds of products -- and for providing services as well.

Bruce Henderson used this insight, an extension of the learning curve, as the basis for founding a worldwide consulting firm: Boston Consulting Group, or BCG. The effects of the experience curve are what make gaining market share so important. The aim is to become the low cost producer by having the dominant share. When several companies in the same industry see an opportunity and all scale up production together, they can wind up chasing one another down the experience curve, much to the delight of the customers. (You can find a series of excellent articles on the experience curve on the BCG web site.)

The experience curve is also relevant to coaching. Obtaining experience curve benefits in decision processes is important for a coach to provide a significant long-term benefit to the client. One key to career advancement is the ability to develop other people within the organization.